Opinion
B203832.
6-24-2009
GRACE FAKHOURY, Plaintiff and Respondent, v. RON NECHEMIA et al., Defendants and Appellants.
Genga & Associates, John M. Genga and Nicole Krasny Ash for Defendants and Appellants Ron Nechemia, EurOrient Financial Group, Ltd., EurOrient Investment/Merchant Banking Group and EurOrient Group Ltd. The Sillas Law Firm, Herman Sillas and Helen E. Strand for Plaintiff and Respondent.
Not to be Published in the Official Reports
EurOrient Financial Group, Ltd., EurOrient Investment/Merchant Banking Group and EurOrient Group, Ltd. (collectively corporate defendants) and Ron Nechemia appeal from the default judgment entered against them in this action arising out of a dispute over Grace Fakhourys retention to obtain investors in a company to develop a power plant in China. We reverse the judgment as to Nechemia and modify the judgment as to the corporate defendants to exclude the award of punitive damages.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Allegations of Fakhourys Complaint; the Cross-complaint
On May 4, 2004 Fakhoury filed a first amended complaint against Nechemia, his wife, Cecelia Lee, and the corporate defendants asserting claims, among others, for breach of employment contract, violation of various California Labor Code provisions, fraud, defamation and money had and received. The first amended complaint alleged Nechemia had hired Fakhoury in February 2000 to raise money from her relatives, friends and acquaintances for investment in Eurica Energy Group-Hu Xian Corporation (Eurica Energy Group), which, doing business through Energy Trade & Shares, had entered into a joint venture to develop a power plant in China. Nechemia initially told Fakhoury she would receive a five percent commission on the amounts invested by her contacts, but later promised her an annual salary of $100,000 instead of the commissions. Although Nechemia told Fakhoury he had a written employment contract for her to sign, he never provided it to her. Nechemia also promised Fakhoury that, for her efforts, she would receive shares of stock equal to one-half the value of the shares purchased by her contacts.
Fakhoury alleged Nechemia owned a 40 percent interest and Lee a 20 percent interest in Eurica Energy Group; Nechemia was the president of Energy Trade & Shares; and both companies had the same corporate address.
From February 2000 through March 2003 a large number of Fakhourys contacts collectively invested $1,654,120 and were issued stock certificates by Energy Trade & Shares. According to the confidential offering memorandum Fakhoury had been instructed by Nechemia to give to her contacts, the joint venture company had received all the approvals, licenses and permits necessary to operate in China and build the power plant. The money raised was to be used primarily for costs associated with project development and management, to purchase equipment and to pay start-up costs and the ongoing costs of operation. According to Fakhoury, however, the money she raised was primarily used by Nechemia and Lee to fund their lavish lifestyle, including the purchase and importation of antique Chinese art and artifacts. Fakhoury alleged she never received her promised salary. The first amended complaint also alleged that from 2001 through 2003 Fakhoury loaned Nechemia, Lee and the corporate defendants $159,139.10 to pay various company expenses and the mortgage on a condominium owned by defendant EurOrient Investment/Merchant Banking Group where Nechemia and Lee lived; the defendants had only repaid $45,000. Additionally, from November 2002 through March 2003 Fakhoury advanced salary payments of $78,160 to nine employees, none of which had been repaid by Nechemia and Lee despite their promises to do so.
The confidential offering memorandum identified EurOrient Investment/Merchant Banking Group as the placement agent and principal investment advisor for the stock offering and also identified it as the accountant and loan administrator for the project. The first amended complaint alleged EurOrient Investment/Merchant Banking Group was the successor-in-interest to EurOrient Investment Group, a privately held firm whose chairman and chief executive officer was Nechemia. It further alleged EurOrient Investment/Merchant Banking Group was a wholly-owned subsidiary of either EurOrient Financial Group, Ltd. or EurOrient Group, Ltd., and that all of the companies operated out of the same address as Eurica Energy Group and Energy Trade & Shares.
In approximately March or April 2003 Fakhoury and a group of employees who were all owed wages met with Nechemia. Nechemia complained Fakhoury had said the investors money was being used by Nechemia and Lee to buy antiques, but assured the group the money was spent on the project, which had started construction. Although Nechemia represented he could produce documentation to support his assurances, despite repeated demands, he never provided any written confirmation of the projects status.
In June 2003 Fakhoury and a group of her contacts who had invested in Energy Trade & Shares met with Nechemia because they had not received annual progress reports on the construction of the project. Nechemia told the investors Fakhoury was a thief, accused her of stealing documents and contracts and claimed she had no financial interest in the project notwithstanding Nechemia had previously instructed Fakhoury to represent that she had. Later Nechemia told another investor Fakhoury had stolen a horse statue worth $500. On June 8, 2003 Nechemia sent a letter to the investors stating the project "remains viable, and its prospects continue to be as bright as ever."
In June or July 2003 Fakhoury retained an attorney in China to investigate the status of the company and the building of the power plant. On July 25, 2003 the attorney wrote, "Eurica Huxian Energy Corporation hasnt registered in any government administration agencies. . . . Currently in Huxian of Xian City, only one company . . . named as the `Xian Power Ltd. Co. is in the early preparation of registration with government but didnt start to register yet."
Based on these and additional allegations Fakhoury sought in the first amended complaint damages of $251,644,67 for unpaid wages (first cause of action—breach of employment contract); $8,333.33, plus attorney fees, for violation of Labor Code sections 201, 202 and 203 (second cause of action); and $192,299.10 for unpaid loans and salary advances (fourth cause of action—money had and received). On her two claims for fraud (third and seventh causes of action) and claim for defamation against Nechemia only (fifth cause of action) she sought general and punitive damages in an amount to be proved at trial. Finally, on her sixth cause of action for alter ego liability, Fakhoury sought a determination that the purportedly separate corporate entities were not legally distinct and that all the named defendants were jointly and severally liable for the damages sought.
The first amended complaint also named Dr. William Fang, Eurica Energy Company and Energy Trade & Shares. Fang was dismissed from the action in 2006. Lee, Eurica Energy Group and Energy Trade & Shares are not parties to this appeal.
Although alleged as a separate claim, alter ego is a theory of liability dependent on the other causes of action, not a cause of action itself. (Hennesseys Tavern, Inc. v. American Air Filter Co. (1988) 204 Cal.App.3d 1351, 1359 ["claim against a defendant, based on the alter ego theory, is not itself a claim for substantive relief, e.g., breach of contract or to set aside a fraudulent conveyance, but rather, procedural, i.e., to disregard the corporate entity as a distinct defendant and to hold the alter ego individuals liable on the obligations of the corporation where the corporate form is being used by the individuals to escape personal liability, sanction a fraud, or promote injustice"].)
On August 20, 2004 all defendants answered Fakhourys first amended complaint. On June 14, 2005 Nechemia and EurOrient Investment/Merchant Banking Group filed a cross-complaint, asserting claims against Fakhoury and others including for breach of contract, misappropriation of trade secrets, conversion and interference with prospective economic advantage.
2. The Default Entered Against the Corporate Defendants and Nechemia
On March 1, 2006 only Fakhoury attended the case management conference and hearing on an order to show cause why the cross-complaint should not be dismissed for, among other reasons, failure to serve cross-defendants except Fakhoury, who had already filed an answer. The trial court dismissed the cross-complaint as to all cross-defendants except Fakhoury and set for March 30, 2006 an order to show cause to strike the answers and enter the defaults of the corporate defendants because of their failure to be represented by a licensed attorney as required by California law. (Caressa Camille, Inc. v. Alcoholic Beverage Control Appeals Bd. (2002) 99 Cal.App.4th 1094, 1101 ["it is well established in California that a corporation cannot represent itself in a court of record either in propria persona or through an officer or agent who is not an attorney"].) Fakhourys counsel served Nechemia, who was acting in propria persona and in his capacity as chief executive officer of the unrepresented corporate defendants, with notice of the ruling.
Apparently, counsel for Nechemia and the corporate defendants had withdrawn after their answers were filed, and the corporate defendants had failed to obtain new counsel.
The notice stated in part, "Because the State of California prohibits corporations from representing themselves before its courts of law and requires corporations to be represented by attorneys, an Order to Show Cause to Strike the Answers and Enter Defaults of the Corporate Defendants, based on their failure to be represented by a licensed attorney, was set for March 30, 2006 at 9:00 a.m., in Department 32." (Emphasis deleted.)
On March 30, 2006, after the corporate defendants failed to appear at the hearing or file a response to the order to show cause, the trial court issued a minute order stating, "the Court determines that no sanction short of striking the Answers and entering the defaults of [Energy Trade & Shares, Eurica Energy Group, EurOrient Financial Group Ltd., EurOrient Group, Ltd. and EurOrient Investment/Merchant Banking] is appropriate and it is so ORDERED as reflected in the notes of the court reporter and incorporated herein by reference." Although not expressly stated, it appears EurOrient Investment/Merchant Banking Groups cross-complaint was also struck because it was not represented by counsel, as required.
On September 8, 2006 Fakhoury moved for sanctions, including terminating sanctions, because Nechemia had violated two court discovery orders: one that ordered him to appear for his deposition (his second court-ordered deposition) and one to provide responses to special interrogatories. Fakhoury argued Nechemias conduct was similar to the defendants conduct in Collison & Kaplan v. Hartunian (1994) 21 Cal.App.4th 1611 in which an appellate court upheld as a terminating sanction the entry of a default judgment.
On October 5, 2006 the trial court granted Fakhourys motion and ordered Nechemias answer and cross-complaint stricken. The order also stated, "Jury trial set for 10-25-06, is reset as a Court Trial re: prove-up, for 10-25-06 . . . ." A notice of ruling prepared by Fakhoury stated in part, "1. Terminating sanctions are appropriate because Ron Nechemia has violated previous discovery orders of the Court; [¶] 2. The Answer and Cross-Complaint by Ron Nechemia are stricken; [¶] 3. Ron Nechemia is in default as to the First Amended Complaint of Plaintiff, Grace Fakhoury."
3. The Trial Against Lee
On October 25, 2006 the court trial against Lee proceeded; she did not attend. On December 29, 2006 judgment was entered against Lee for $192,299.10, the amount identified in the first amended complaint for unpaid loans and salary advances, and $68,699.43 in prejudgment interest. The judgment stated, "As [Fakhoury] has failed to timely submit a Default Judgment package as to def. Ron Nechemia, noobligation is imposed by this Judgment on him." This judgment, however, was apparently vacated on March 5, 2007 and, and a new one substituted nunc pro tunc.
The reason for vacating the judgment is not explained, and the appellate record does not contain a copy of the order vacating judgment or of the new judgment.
4. The Default Judgment
On June 4, 2007 Fakhoury served Nechemia with three proposed orders for awards: one for a joint and several award against Nechemia and Lee for unpaid loans and salary advances, prejudgment interest and costs in the amount of $261,453.32; one for an award against Nechemia for defamation in the amount of $14 million ($875,000 actual damages and $13,125,000 punitive damages); and one for an award against Nechemia and the corporate defendants, as well as Eurica Energy Group and Energy Trade & Shares, for unpaid compensation ($251,644.67), violation of the Labor Code ($8,333.33), attorney fees ($46,647.86), prejudgment interest ($ 158,050.61), punitive damages ($165,412) and costs ($5,367.15) in the total amount of $635,455.62. On July 13, 2007 counsel for Fakhoury filed a declaration with the court explaining the three proposed orders.
On July 31, 2007 Fakhoury served Nechemia with a statement of damages for her defamation claim specifying special damages of $875,000 and punitive damages of $13,125,000. In a declaration Fakhoury filed in support of her damages claim she stated, "8. After I left my employment with EurOrient corporations and Nechemia, I could not find a job in the same field. It is my belief that Nechemia told his lies to anyone that would call him to verify my previous employment. [¶] 9. In order to work, I had to start my own business. To date I have invested a little more than one million dollars ($1,000,000.00) from my investments that I would otherwise have received interest on and additional earnings. In addition I took out loans on which I pay from seven to twenty-two percent interest. I have recouped one-hundred twenty-five thousand dollars ($125,000.00) as of May, 2007."
On August 31, 2007 Fakhoury filed briefs in support of her proposed orders, including one arguing Nechemia should be held jointly and severally liable for the judgment rendered against Lee for $260,998.53 after the October 25, 2006 court trial pursuant to Family Code section 910, which provides the community estate is liable for a debt incurred by either spouse before or during marriage.
The brief erroneously stated the judgment was for $260,993.82.
On August 31, 2007 the trial court signed Fakhourys three proposed orders, but reduced the defamation award to $8,875,000 ($8,000,000 for punitive damages and $875,000 for actual damages).
Notwithstanding the court had already signed Fakhourys proposed orders, on September 12, 2007 Fakhoury served Nechemia with a statement of damages specifying damages of $251,644.67 for unpaid compensation, $8,333.33 for violation of the Labor Code, $46,647.87 for attorney fees, $158,050.61 for prejudgment interest, $165,412 for punitive damages and $5,367.15 for costs. On September 21, 2007 the trial court entered judgment consistent with the August 31, 2007 orders.
Fakhoury did not identify in her statement of damages or proposed orders which fraud cause of action was the basis for her claim for $165,412 in punitive damages. Nechemia and the corporate defendants have assumed on appeal it relates to her third cause of action for fraud, which was based upon the allegations they had violated the Labor Code.
CONTENTIONS
Nechemia contends the default judgment is void because Fakhoury failed to give him notice of the amount of actual or punitive damages she sought for defamation prior to entry of default. Nechemia and the corporate defendants also contend the default judgment is void because Fakhourys claims are not sufficiently pleaded to state a cause of action and they were not given notice of the amount of punitive damages claimed in connection with Fakhourys third cause of action for fraud.
Because we reverse the judgment against Nechemia on this ground, we need not address the other grounds on which he challenges the judgment.
DISCUSSION
1. The Default and Default Judgment Entered Against Nechemia Is Void
Code of Civil Procedure section 580 limits the damages a plaintiff may recover in a default proceeding when the defendant has failed to answer the complaint to the amount "demanded in the complaint, in the statement required by Section 425.11, or in the statement provided for by Section 425.115 . . . ." This limitation protects the defendants due process right to notice of his or her potential maximum liability when deciding to defend a lawsuit or let it proceed by way of default. (Becker v. S.P.V. Construction Co. (1980) 27 Cal.3d 489, 494 ["The notice requirement of section 580 was designed to insure fundamental fairness. Surely this would be undermined if the doors were opened to speculation, no matter how reasonable it might appear in a particular case, that a prayer for damages according to proof provided adequate notice of a defaulting defendants potential liability."].) Section 580 and related statutes "aim to ensure that a defendant who declines to contest an action does not thereby subject himself to open-ended liability." (Greenup v. Rodman (1986) 42 Cal.3d 822, 826 (Greenup); accord, Electronic Funds Solutions v. Murphy (2005) 134 Cal.App.4th 1161, 1173.) "The defendant is entitled to `"one `last clear chance to respond to the allegations of the complaint and to avoid the precise consequences . . . [of] a judgment for a substantial sum . . . [without] any actual notice of . . . potential liability . . . ."" (Schwab v. Rondel Homes, Inc. (1991) 53 Cal.3d 428, 433.)
Statutory references are to the Code of Civil Procedure unless otherwise indicated.
Although section 580 is on its face limited to defaults occurring when the defendant fails to answer the complaint, the due process requirement a defendant receive notice of the maximum amount of liability before default can be entered has been extended to instances when the default is the result of willful discovery abuses. (Greenup, supra, 42 Cal.3d at p. 828 ["when an answer is stricken as a sanction for the defendants obstruction of discovery, it is as if no answer had been filed in the first instance"]; Electronic Funds Solutions v. Murphy, supra, 134 Cal.App.4th at p. 1175 [rejecting contention Legislature effectively overruled Greenup by enacting § 2023 concerning discovery sanctions; "section 580 continues to govern the amount of damages available on a default judgment entered as a discovery sanction"].) Even "obstreperous" defendants "guilty of reprehensible conduct" are entitled to the due process protection of notice. (Greenup, at p. 829.) "Such notice enables a defendant to exercise his right to choose—at any point before trial, even after discovery has begun—between (1) giving up his right to defend in exchange for the certainty that he cannot be held liable for more than a known amount, and (2) exercising his right to defend at the cost of exposing himself to greater liability." (Ibid.; accord, Matera v. McLeod (2006) 145 Cal.App.4th 44, 61 (Matera).)
Ordinarily notice of the defendants maximum potential liability is provided by the complaint. (Cummings Medical Corp. v. Occupational Medical Corp. (1992) 10 Cal.App.4th 1291, 1296.) However, in personal injury or wrongful death cases the plaintiff is prohibited from stating in the complaint the amount of damages demanded (see, e.g., § 425.10, subd. (b)) and therefore must serve the defendant with a statement of damages pursuant to section 425.11 before a default may be taken. (Matera, supra, 145 Cal.App.4th at p. 60.) Similarly, no complaint may allege an amount demanded for punitive damages (Civ. Code, § 3295, subd. (e)), thus requiring the plaintiff to serve the defendant with a statement of punitive damages in order to "preserve[] the right to seek punitive damages pursuant to Section 3294 of the Civil Code on a default judgment."
Section 425.10 provides, "(a) A complaint or cross-complaint shall contain both of the following: [¶] (1) A statement of the facts constituting the cause of action, in ordinary and concise language. [¶] (2) A demand for judgment for the relief to which the pleader claims to be entitled. If the recovery of money or damages is demanded, the amount demanded shall be stated. [¶] (b) Notwithstanding subdivision (a), where an action is brought to recover actual or punitive damages for personal injury or wrongful death, the amount demanded shall not be stated . . . ."
Section 425.11, subdivisions (b) and (c) provide, "(b) When a complaint is filed in an action to recover damages for personal injury or wrongful death, the defendant may at any time request a statement setting forth the nature and amount of damages being sought. The request shall be served upon the plaintiff, who shall serve a responsive statement as to the damages within 15 days. In the event that a response is not served, the defendant, on notice to the plaintiff, may petition the court in which the action is pending to order the plaintiff to serve a responsive statement. [¶] (c) If no request is made for the statement referred to in subdivision (b), the plaintiff shall serve the statement on the defendant before a default may be taken."
(§ 425.115, subd. (b); see Matera, at p. 60.) Notice of the liability to which the defendant may be subjected must be provided "a reasonable period of time before default may be entered." (Schwab v. Rondel Homes, Inc., supra, 53 Cal.3d at p. 435; accord, Matera, at p. 61.)
Fakhoury did not provide Nechemia with notice she was seeking more than $13 million in damages for her defamation claim and $165,000 in punitive damages for her fraud claims until, at best, June 4, 2007, eight months after his answer was stricken and default entered as a terminating sanction for disobeying the courts discovery orders. There is no question Nechemia was not provided any notice, let alone reasonable notice, of the considerable damages Fakhoury sought prior to entry of default.
Because we conclude the notice provided by Fakhoury on June 4, 2007, in the form of the three proposed orders served on Nechemia was not timely, we need not address whether Fakhourys claim for defamation was in fact a personal injury claim (see Electronic Funds Solutions v. Murphy, supra, 134 Cal.App.4th at p. 1176 [statement of damages not a substitute for amended complaint in non-personal injury/wrongful death case in which complaint fails to allege damages]) or whether, even if it was, such notice was sufficient as opposed to the later-served statement of damages.
Fakhoury contends she never filed a motion for entry of default after her motion for terminating sanctions was granted and notes neither the court nor the clerk completed the Judicial Council form for entry of default (CIV-100, Request for Entry of Default). Accordingly, she argues, no default against Nechemia had been entered before the court rendered judgment. Fakhoury suggests Nechemia could have simply moved to have his pleadings reinstated after his answer had been stricken until the default judgment itself was entered. Thus, she asserts, the notice of damages she provided in June and July 2007 was sufficient.
Putting aside the variety of technical flaws in Fakhourys argument, she misapprehends the fundamental principle articulated in Greenup. "The striking of a defendants answer as a terminating sanction leads inexorably to the entry of default." (Matera, supra, 145 Cal.App.4th at p. 62.) Thus, Nechemia was entitled to notice of the amount of damages Fakhoury was seeking sufficient to enable him to make an informed decision whether to respond to Fakhourys motion for terminating sanctions and continue to expend the time and money to defend himself or simply to let the case proceed to default judgment for a certain sum. (See ibid. [service of statement of damages two days before court struck defendants answer and entered defaults "was not a reasonable period of time to apprise the defendants of their substantial potential liability for purposes of due process"].) Nechemia ostensibly made the calculation it was in his best interest to allow the case to proceed to default judgment. He had no more reason to seek to reinstate his pleadings after his answer was stricken (at least until he knew the extent of Fakhourys damages claim) than he did before he decided not to respond to Fakhourys motion for terminating sanctions.
Although we need not address the more technical points, we note the trial courts minute order granting Fakhourys motion for terminating sanctions and setting a prove-up hearing for October 25, 2006 is most reasonably interpreted to include entry of default as well. There would be no need for a prove-up if default had not been entered. (See Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2009) ¶ 5:10, p. 5-4 (rev. # 1 2008 ["[a]fter defendants default has been entered, plaintiff may apply for a judgment based on such default"].)
If no damages at all have been specified, then no default may be taken (§ 425.11, subd. (c)); and any default judgment is in excess of the courts jurisdiction and void. (See Finney v. Gomez (2003) 111 Cal.App.4th 527, 534 ["courts have consistently held section 580 is an unqualified limit on the jurisdiction of courts entering default judgments"];Falahati v. Kondo (2005) 127 Cal.App.4th 823, 830 ["[a] default judgment is void if the trial court lacked jurisdiction over the parties or the subject matter of the complaint or if the complaint failed to `apprise[] the defendant of the nature of the plaintiffs demand, or if the court granted relief which it had no power to grant including a default judgment which exceeds the amount demanded in the complaint," fn. omitted].) Consequently, the default and default judgment against Nechemia are void; the order striking his answer must be vacated; and his answer reinstated. (Matera, supra, 145 Cal.App.4th at p. 62 ["[t]o vacate the defaults without reinstating defendants answer would be an empty gesture"].) Nechemias cross-complaint, however, is not reinstated. (Id. at pp. 62-63.)
2. The Default Judgment Against the Corporate Defendants Is Modified To Exclude the Award for Punitive Damages
a. The claims are sufficiently pleaded to support a default judgment
A defaulting defendant admits only facts that are properly pleaded in the complaint. (Falahati v. Kondo, supra, 127 Cal.App.4th at p. 829.) Thus, "it is well established a default judgment cannot properly be based on a complaint which fails to state a cause of action against the party defaulted . . . ." (Ibid.) The corporate defendants contend the default judgment against them is void because Fakhoury failed to sufficiently allege facts supporting the claim either Nechemia or the corporate defendants had hired her.
The first amended complaint clearly alleges Nechemia hired Fakhoury: "In February 2000, Fakhoury was hired by Nechemia to contact her relatives, friends, and acquaintances and to engender interest for them to purchase shares in [Eurica Energy Group] through Fakhourys presentation of information from a script given to her by Nechemia." Although the corporate defendants argue this allegation fails to identify the actual parties to the employment agreement, it is hard to imagine a clearer statements of a contract between Fakhoury and Nechemia as principals. To be sure, it is not impossible to interpret the first amended complaint to allege that Nechemia hired Fakhoury to work for one (unspecified) of the corporate defendants for which he acted as a corporate officer and to conclude, as a result, Fakhoury failed to adequately identify the other contracting party. But that is not the only, let alone the most plausible construction of the pleading. A more reasonable interpretation of the admitted allegations in the first amended complaint is that Nechemia hired Fakhoury and also created a series of interrelated companies through which he acted. Nechemia, according to the complaint, is directly liable on the contract, and the corporate defendants are liable under the alter ego doctrine.
Advancing this construction of the pleading, Nechemia and the corporate defendants contend, if Nechemia hired Fakhoury on behalf of a corporate party, he could not be personally liable on the contract. That argument fails to confront Fakhourys allegations of alter ego liability.
We recognize Division Three of the Fourth District, in a case of first impression in California, rejected the doctrine of outside reverse piercing that would allow a third party judgment creditor to reach corporate assets in order to satisfy a shareholders personal liability. (Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510.) The issue of reverse piercing presented by the allegations of the first amended complaint in the case at bar is somewhat different from the question addressed by Justice Fybel and his colleagues in Postal Instant Press. (See id. at p. 1523 ["the issue addressed by outside reverse piercing is the shareholders transfer of personal assets to the corporation to shield the assets from collection by a creditor of the shareholder"].) But we need not consider whether use of a reverse piercing or alter ego doctrine would be proper here because the corporate defendants failed to raise the issue either in the trial court or on appeal. (See Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979 [not the appellate courts function to address arguments not raised on appeal].)
EurOrient Group also contends there are no facts alleged to support Fakhourys claim it was the alter ego of the other corporate defendants and thus default judgment was improperly entered as to it on this basis as well. (See Laird v. Capital Cities/ABC, Inc. (1998) 68 Cal.App.4th 727, 737 ["there is a strong presumption that a parent company is not the employer of its subsidiarys employees"]; Luis v. Orcutt Town Water Co. (1962) 204 Cal.App.2d 433, 443 ["[i]t is not true that any wholly owned subsidiary is necessarily the alter ego of the parent corporation"].) Fakhoury, however, alleges not only that EurOrient Group was the alter ego of the other corporate defendants, but also that Nechemia used all the corporate defendants—intertwined in a labyrinthine web and operated out of the same corporate office—for his own benefit. Read in the context of the entire first amended complaint, the allegations EurOrient Group and Nechemia were alter egos of each other and of all the other corporate defendants, although lacking in detail, were sufficient.
b. The punitive damages award is void
The corporate defendants were not provided notice of the amount of punitive damages sought by Fakhoury on her fraud claims until 14 months after their defaults were entered on March 30, 2006, thus rendering the punitive damages award void. (§ 425.115; Matera, supra, 145 Cal.App.4th at pp. 60, 62.) Fakhoury contends, as she did with respect to Nechemia, no default was actually entered because she never moved for entry of default and neither the court nor the clerk executed the Judicial Council form for entry of default. There is no question, however, default was entered by the court on March 30, 2006: The courts order states, "the Court determines that no sanction short of striking the Answers and entering the defaults of [Energy Trade & Shares, Eurica Energy Group, EurOrient Financial Group Ltd, EurOrient Group, Ltd. and EurOrient Investment/Merchant Banking] is appropriate and it is so ORDERED as reflected in the notes of the court reporter and incorporated herein by reference."
Fakhoury also argues, notwithstanding section 425.115s clear mandate, notice of punitive damages before entry of default should not be required when the court "has unilaterally taken the step to enter the default against a non-represented corporation" because such action "eliminate[s]" a valid claim held by the plaintiff without that plaintiffs right to be heard or to take remedial action." Fakhoury, however, had ample notice of the courts intention to enter the corporate defendants defaults and opportunity to ensure her right to punitive damages would be preserved. Fakhourys counsel attended the March 1, 2006 case management conference at which the court set the order to show cause to strike the corporate defendants answers and enter their defaults and, indeed, counsel provided notice to Nechemia expressly identifying the possibility defaults might be entered. Fakhoury could have filed a statement of punitive damages at the same time she served notice of the order to show cause or sought a continuance from the court to allow her an opportunity to do so. Her failure to pursue one of these available options forfeited her entitlement to seek punitive damages, and thus the judgment against the corporate defendants must be reduced by $165,412. (See Greenup, supra, 42 Cal.3d at p. 829 ["[b]ecause the default judgment in this case exceeded the ceiling on damages to which plaintiff is subject, we conclude that the award must be amended to conform to the limitations specified in section 580"]; Ostling v. Loring (1994) 27 Cal.App.4th 1731, 1743 ["[o]rdinarily when a judgment is vacated on the ground the damages awarded exceeded those pled, the appropriate action is to modify the judgment to the maximum amount warranted by the complaint"]; Wiley v. Rhodes (1990) 223 Cal.App.3d 1470, 1475 [reversing award of punitive damages for failure to give notice of amount prior to entry of default].)
DISPOSITION
The judgment as to Ron Nechemia is reversed; the judgment as to EurOrient Financial Group, Ltd., EurOrient Investment/Merchant Banking Group and EurOrient Group, Ltd. is modified to exclude the award of $165,412 for punitive damages; and the matter remanded for further proceedings not inconsistent with this opinion. Ron Nechemia is to recover his costs on appeal. The other parties are to bear their own costs.
We concur:
WOODS, J.
ZELON, J.